ECB to take remedial action for failing emission goals

The European Central Bank (ECB) announced on Tuesday its intention to establish emission reduction targets for companies in its corporate bond portfolio, indicating it may take “remedial action” if these targets are not met.

The ECB currently holds approximately 350 billion euros ($375.73 billion) worth of corporate bonds, which were acquired during a period of low inflation, and has been actively encouraging these companies to adopt more environmentally sustainable practices.

The ECB has been urging these firms to adopt greener practices, including through its Asset Purchase Programme (APP) and Pandemic Emergency Purchase Programme (PEPP).

The central bank will set interim emission targets aligned with EU regulations for companies in the APP and PEPP portfolios. Should companies fail to meet these targets, the ECB may take remedial action as necessary, though specific measures were not detailed. The ECB’s approach typically includes options such as divestment.

As the ECB’s bond holdings mature, its corporate portfolio is expected to decrease by approximately 40 billion euros over the next year. The bank has yet to finalise a timeline for implementing these emission reduction targets, indicating that a decision from its Governing Council may be required to proceed.

Attribution: Reuters.